The Developmental Skin Biology Unit started officially under Dr. Maria Morasso as a tenure-track investigator at the end of May 2000. Therefore, the progress report of the research will be presented as published results obtained in the last year. The major purpose of this project is to understand the molecular mechanisms that regulate the early stages of epidermal differentiation. Epidermis has been used as an excellent model for studying the process of cellular differentiation because the cells form a stratified structure during development, and each strata is easily identified by morphology and expression of specific markers. Studies by Morasso and collaborators have focused on a homeodomain transcription factor, known as Distal-less 3 (Dlx3), that plays a central role in activating the expression of structural proteins that are necessary for the formation of the cornified layer. During epidermal development, the expression of Dlx3 is restricted to the differentiated (suprabasal) cells, predominantly the granular cells of the mouse stratified epidermis. Transgenic temporal and spatial mis-expression of Dlx3 in the pre-differentiated basal layer caused a highly abnormal skin phenotype, characterized by cessation of proliferation and premature differentiation of the basal cells judged by the upregulation of expression of late differentiation markers such as loricrin and filaggrin. The importance of Dlx3 in the patterning and development of ectodermal structures derived from epithelial-mesenchymal interactions during embryogenesis (i.e. tooth, hair) is corroborated by the effects of DLX3 mutations in patients with the autosomal dominant Tricho-Dento-Osseous (TDO) syndrome.The objectives of this project are to study the processes that contribute to epidermal cell fate and differentiation by: 1) characterizing the pathway(s) that regulate transcriptional activity during epidermal differentiation; 2) exploring the function, interacting factors and target genes of the homeodomain protein Dlx3 as a crucial transcriptional regulator of terminal differentiation in the skin.To elucidate the functional role of Dlx3, a targeted deletion of the gene was performed and the analysis of the phenotype. Targeted deletion of Dlx3 results in embryonic developmental arrest around day 9.5-10, associated with a gross failure of the placenta to undergo proper morphogenesis. It was not possible to assess the effects of Dlx3 loss of function on epidermal differentiation, since embryonic death occurs significantly earlier than the onset of epidermal stratification (E15.5). These results have led us to commence a project for conditional targeting of Dlx3 to be able to specifically assess the role of this homeodomain transcription factor in epidermal stratification.We have studied the regulatory control of the Dlx3 gene and the biochemical characteristic of the protein by analyzing the different functional domains of Dlx3 and the overall role of these regions in the transcriptional function of Dlx3 in epidermal differentiation.The intracellular localization of the green fluorescent protein (GFP) fused to Dlx3 was examined in keratinocytes induced to differentiate by calcium. In differentiated keratinocytes, GFP-Dlx3 localized to the nucleus. A bipartite nuclear localization signal (NLS) was identified at the amino terminus of the homeodomain. The insertion of the Dlx3 bipartite NLS sequence, localized the cytoplasmic fusion protein, GFP-keratin 14 (K14), to the nucleus. This is one of the first bipartite NLS identified in a vertebrate homeodomain protein shown to be necessary and sufficient for nuclear localization. Dlx3 NLS sequences were found to be critical not only for nuclear localization, but also were essential for Dlx3 transactivation potential, specific DNA binding, and interaction with Msx1 protein. To determine the factors that induce Dlx3 gene expression, we have cloned the 1.2-kb and 2.4 kb proximal region of the mouse gene and analyzed its cis-regulatory elements and potential trans-acting factors. The regulatory aspects are centered in the calcium inducublity of the gene and are being characterized using transgenic mice with the beta-galactosidase reporter gene.